NEW YORK - Oil prices have surged 15 per cent this month, dredging up memories of last year's spike, while gasoline prices could soon eclipse summer highs.
Crude is being tugged higher for different reasons this time, rising primarily as the dollar gets weaker. Oil is traded in the U.S. dollar, which allows investors holding euros or other strong currencies to buy more as the dollar falls.
The dollar hit an annual low on Friday, and anyone holding a euro could trade it in for more than US$1.50.
By Friday, even the plunging value of the dollar could not push prices higher as it had throughout the week, most likely because there is little to suggest that all of that oil will be used.
Energy demand is extremely weak and the country's storage tanks are brimming with crude, said Peter Beutel, an analyst at Cameron Hanover.
There are also whispers that the Organization of Petroleum Exporting Countries, which supplies more than 35 per cent of the world's crude, will decide to open up the spigots when it meets in December.
"At some point, the bubble has to burst," Beutel said.
The dollar had also weakened during last year's run-up to $147 per barrel, but there were other reasons for buying oil. Petroleum companies were nearing their peak production levels and traders fretted about the growing energy appetites of China and other developing countries.
This year, there is no immediate danger of an oil shortage with the U.S. and other countries mired in recession.
Benchmark crude for December delivery gave up 10 cents Friday to $81.09 a barrel on the New York Mercantile Exchange. Oil was trading at less than $70 per barrel to start the month.
In London, Brent crude for December delivery lost 60 cents to $78.91 a barrel on the ICE Futures exchange.
Just like last summer when soaring oil prices dragged gasoline prices higher, prices at the pump have been rising steadily.
In other Nymex trading, heating oil dropped 1.93 cents to $2.0753 a U.S. gallon (3.78 litres). Gasoline for November delivery was lost less than a penny to $2.037 a U.S. gallon, while natural gas for November delivery lost six cents to $4.887 per 1,000 cubic feet (28.3 cubic metres).
